P-xylene Supply Was Tighter in China in 2011   

By Hu Shiming, Research Institute of Industrial Economics of CNCIC

Capacity was unchanged, but output declined

After China's p-xylene (PX) capacity expanded significantly in 2009, its growth slowed down. In 2010, only PetroChina's Urumqi Petrochemical Company's 1 million t/a PX unit was put into operation, and last year, no new PX units came into service. As of the end of 2011, there were a total of 13 PX producers in China, with a total capacity of 8.195 million t/a. Urumqi Petrochemical's PX unit, which was put into operation near the end of 2010, had a very low operating rate due to a raw material shortage and being located far from downstream users. On July 11, 2011, CNOOC Huizhou Refining Company had a fire accident due to an oil leak in its reforming tower, leading to the shutdown of its 840 000 t/a PX unit, which did not resume production until mid-November. Affected by the low operating rates of these two large PX units, China's PX output in 2011 is estimated to drop by 10% year on year (yoy), reaching about 6.3 million tons (6.95 million tons in 2010), and the overall operating rate of the PX industry is expected to be 76.9%.

Consumption increased

In 2011, four new terephthalic acid (TPA) units with a combined capacity of 4.3 million t/a were put into production in China, that is, Jiangyin Hanbang Petrochemical Co Ltd's 600 000 t/a TPA unit, Zhejiang Yisheng Petrochemical Co Ltd's 2 million t/a TPA unit, Yisheng Dahua Petrochemical Co Ltd's 500 000 t/a TPA unit, and Jiangsu Hailun Chemical Co Ltd's 1.2 million t/a TPA unit. By the end of 2011, China's total TPA capacity reached 20 million t/a (16.8 million t/a in 2010). The output of TPA in China in 2011 is estimated to be about 16.5 million tons, and its demand for PX was about 10.89 million tons (0.66 ton PX is required by the production of 1 ton PTA).
   In 2011, the apparent consumption of PX in China is estimated to reach 10.902 million tons (10.267 million tons in 2010), up 6.2% yoy. The demand growth of PX was mainly driven by the steady growth of TPA production. Internationally, PX is also used for the production of dimethyl terephthalate (DMT). But due to the low profit margin of DMT and the enforcement of increasingly stringent environmental regulations, China has produced no DMT since 2005. In addition, PX can be applied in pesticides and other areas, but the demand in these areas is very limited (about 12 000 tons a year).

Imports reached a record high

In the first 11 months of 2011, China imported 4.575 million tons of PX in total. For the whole year of 2011, the import is estimated to have exceeded 5 million tons (3.527 million tons in 2010), up about 41.8% yoy. In the first 11 months, China's total export of PX was 333 000 tons, and the annual export is estimated to have reached about 370 000 tons (210 000 tons in 2010).

Prices went up and down repeatedly

Due to international crude oil price hikes and PX supply changes, PX prices in 2011 fluctuated dramatically. Despite repeated ups and downs, the average PX price increased by more than 40% in 2011 compared to in 2010. In terms of the difference between PX prices and mixed xylene (MX) prices, it can be seen that the average profit margin of PX was higher in 2011 than in 2010.
   Early in 2011, several PX units in Asia stopped production. But at the same time, the downstream demand for PX increased, leading to a hike in PX prices. On March 11, due to Japan's 9.0 earthquake and subsequent tsunami, PX units in that region with a combined capacity of nearly one million t/a were shut down. As a result, PX prices soared, reaching a record high in the Asian market. In China, the PX price rose from RMB10 200 /t in January up to RMB13 500 /t in April. Later, it plummeted and then went up and down repeatedly. It fell from RMB12 520 /t in May to RMB11 000 /t in July. As many PX units at home and abroad were frequently shut down for maintenance or due to accidents, the supply of PX was very tight in Asia, thus pushing up PX prices. In China, the PX price in October rose back to RMB13 000 /t. In mid-November, CNOOC Huizhou Refining Company's PX unit was restarted after it had been shut down for four months due to an accidental fire. The domestic supply of PX gradually increased. Meanwhile, the domestic TPA market was in a downturn. Due to the two factors, the domestic PX price went down. In November, the PX price fell back to RMB11 300 /t. It is estimated that the PX price will stay relatively steady in the short term. Movements of PX and MX prices in China in 2010 and 2011 are shown in Figure 1.

Capacity expansion was blocked due to public protests

On August 8, due to Tropical Storm Muifa, two sections of the breakwater of the pier nearby Dalian Fujia Dahua Petrochemical Co Ltd (Fujia Dahua) seriously collapsed. As a result, the company's PX unit was damaged, and PX leaked, triggering Dalian citizens' protest. On August 14, Dalian's municipal government demanded that the company stop production and relocate its PX unit. On September 8, Fujia Dahua began to stop production, but on September 19, it resumed production. A few years ago, Xiamen citizens successfully forced a local PX project to be relocated. If Fujia Dahua's PX project is relocated, the local government will give the company huge compensation. On September 26, the National Development and Reform Commission (NDRC) and other authorities jointly issued the Emergency Notification on Strengthening the Safety and Environmental Protection Management of PX and Other Sensitive Products, which requires raising the access threshold of PX and other sectors making sensitive products, especially toxic chemicals. This policy will have substantial impact on the PX industry and may seriously block the expansion of PX capacity in China.

Sinopec made a breakthrough in aromatics adsorption separation technology

On October 9, the industrial demonstration project for aromatics adsorption separation technology developed by Sinopec Yangzi Petrochemical Company successfully went into operational mode, and its product purity reached 99.7%. This is a major breakthrough in Sinopec's aromatics production technology portfolio, making it the world's third company with the full range of proprietary aromatics production technology. Previously, only the United States' UOP and France's Axens had full aromatics production technology portfolios, while other companies only had some single technologies. This lays a solid foundation for the development and application of the full technology portfolio for large, new-generation PX units in China.

PX will be in short supply in the future due to slow capacity expansion

PX availability remains a bottleneck in the development of China's polyester industry.  If a steady supply of PX cannot be achieved, this will directly affect the development of the whole polyester industrial chain. In China in 2011, no new PX units were put into production, but TPA production capacity increased by 4.3 million t/a, so the gap between PX supply and demand was wider in 2011 than in 2010. It is expected that new TPA capacity in China in 2012 will total about 10 million t/a, but the new PX capacity will be only 1.85 million t/a, so the misfit between supply and demand will still be very large.
   Compared with the TPA industry, the PX industry has higher demand for capital and technology and is a highly capital and technology-intensive industry. In China, the construction of new TPA projects must be reported to NDRC for review and to the State Council for approval. According to the national five-year plan, NDRC will strictly review new TPA projects and control new investment in the TPA industry in order to avoid over-investment and waste of resources. In addition